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The Doctrine of Notice - Unregistered Land

 

The doctrine of notice applies in unregistered land to determine priority of equitable interests not governed by the Land Charges Act 1925. The most significant of which is the beneficial interest under a trust. Under the doctrine of notice, a bona fide purchaser of a legal estate for value takes priority over any pre-existing equitable interest which is not registrable as  a land charge, provided they did not have actual, constructive or imputed notice of their existence. In many conveyances, the doctrine of notice will not be relevant, as overreaching will generally transfer the beneficiaries interest in the land to the proceeds of sale see City of London Building Society v Flegg [1988] AC 54 Case summary. The doctrine of notice has no application in registered land where priority is determined by a separate regime including overriding and minor interests. The doctrine of notice is therefore relevant in unregistered land where the capital moneys of the conveyance were paid to a single trustee.
 
For a purchaser or mortgagee to acquire the land free of the pre-existing equitable interest they must prove that they are a bona fide purchaser of a legal estate for value without notice.
 
 
Bona fides
 
Bona fides is a Latin term meaning good faith. The purchaser or mortgagee must demonstrate they acted in good faith in entering the transaction.
 
 
Legal estate
 
This includes a purchase of the freehold, a legal lease or charge by way of legal mortgage
 
 
For value 
 
 
This excludes gifts and conveyances for a nominal consideration. The consideration need not be market value:
 
 
 
 
 
Without notice
 
For the purchaser or mortgagee to take the legal estate free from the equitable interest, they must not have notice (knowledge) of the interest. Where a purchaser or mortgagee is aware or should have been aware of the equitable interest this affects their conscience and they are then bound by the interest. There are three types of notice: actual notice, constructive notice and imputed notice.
 
Actual notice
 
This is where the purchaser or mortgagee was consciously aware of the existence of the equitable interest.
 
Constructive notice
 
Constructive notice is concerned with what the purchaser or mortgagee ought to be aware of or what they would have discovered by making reasonable inquiries. Constructive notice is set out in s.199(1)(ii) Law of Property Act 1925 which provides that a purchaser will be fixed with notice if "it is within his own knowledge or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him."
 
Reasonable inquiries including visiting the property and asking any occupants if they have an interest or if they are a tenant to whom they pay their rent:
 
Hunt v Luck [1902] 1 Ch 428
 
 
The purchaser is required to make inquiries as to all occupants even if their occupation is consistent with the title offered: See:
 
 
 
Rejecting the position stated by Stamp J in
 
 
Caunce v Caunce [1969] 1 WLR 286
 
 
Failure to make any inspection of the property at all will result in the purchaser or mortgagee being fixed with constructive notice:
 
 
Lloyds Bank v Carrick [1996] 1 WLR 783    Case summary
 
 
An inadequate inspection may also result in being fixed with constructive notice. For example where a pre-arranged visit allows the legal owner to hide evidence of occupation:
 
 
Kingsnorth Finance v Tizard [1986] 1 WLR 783   Case summary
 
 
Imputed notice
 
A purchaser or mortgagee is deemed to know all that his agent knows or has constructive notice of under s.199 (1)(ii)(b) Law of Property Act 1925.
 

The Doctrine of Notice - Unregistered Land